Glossary- Life Insurance, Health Insurance, Retirement

Redemption fee

Fee levied for-selling shares of your index fund. Usually a fixed percentage of the total value of your fund.

RBI

Reserve Bank of India

Reduced paid up insurance

Reduced paid up insurance can be offered on a policy that has been in force long enough to acquire a cash value and where the policy holder does not wish to continue paying further premiums. The policy is converted with the consent of the policyholder whereby a reduced sum assured is payable on similar terms and conditions of the original basic policy.

Reduced sum assured

Where the sum insured proposed or existing is reduced. If such underwriting terms are offered, you are not reducing the risk but just the liability.

Reinstatement / Revival

This refers to the process where the policy that has terminated for example due to a lapse of non-payment of premium and the owner has applied for the policy to be reinstated and the company has agreed to do so on certain conditions.

Renewal Premiums

Premiums that are payable after the initial premium and that are a condition for the continuation of the policy.

Repudiation of a claim

This process takes place when the claims examiner looks at the policy document and the evidence submitted to him or her and makes a decision to reject it.

Return

The value received (income plus capital) annually from an investment, usually expressed as a percentage.

Reversionary annuity

An annuity provides that in the event of death of a person "A" during the lifetime of a person "B", the latter will receive an annuity for the remainder of his or her life. If "B" dies before "A", nothing is payable.

Reversionary bonus

This refers to the portion of surplus distributed to with profit policyholders. They are declared annually and increase the value of the policy. It is usually expressed as a percentage of the sum insured. It can be either simple based purely in the sum insured or compound based on the sum insures plus previous bonus. Once allocated, the bonuses cannot be removed or reduced by the company.

Riders

Additional or supplementary benefits that are bought together with a main life policy on the same life and are combined for the purposes of collecting one premium. They ride on and are considered as part of the main policy. They could be added, amended or deleted from the main policy, any time, subject to risk assessment. Details and the terms and conditions of the benefits are clearly indicated in the main policy document.

Risk assessment

This part of the underwriting process whereby the risk of the happening of the insured event to the life insured in evaluated and a decision is made if the case can be accepted on terms applied for by the insured. It is done by examining all information in hand and obtained as its request and using the weight of experience and statistical evidence and studies.

Risk classification

The process whereby applicants with similar levels of risk are placed in a separate basket so that the appropriate pricing is charged for the individuals within each respective basket.

Risk selection

The process whereby you determine whether a risk proposed such as an application for life insurance to the company is insurable or not insurable.

Risk tolerance

The willingness of an investor to tolerate the risk if losing money for the potential to make money.

Rule of 72

The formula for approximating the time it will take for a given amount of money to double at a given compound interest rate. The formula is simply 72 divided by the interest rate. In six years, Rs. 1000/- will double at a compound annual rate of 12% (72 divided by 12 equals 6)

Rupee Cost Averaging

A system of investing in which an individual reinvests money into the same fund on a regular basis usually monthly. Often investors can choose an option in which money is automatically withdrawn from their banking account and invested into the fund at a specified time of the month.